Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

Boosting Domestic Demand And Investments Is Good For Germany – And The Eurozone

Dimitris Papadimoulis 25th January 2018

Dimitris Papadimoulis

Dimitris Papadimoulis

The outcome of the first negotiation package agreed between CDU/CSU and SPD needs to become more precise before being approved by their congresses. There is a long way to go for the creation of a new “grand coalition” and in the meantime, there are some issues that need to be addressed.

On one hand, regarding domestic affairs, it is important to point out that a core issue is that of boosting public investments and increasing income and social convergence, especially between western and eastern federal states. Although Germany has achieved extremely high trade surpluses, domestic demand is still weak and small and medium-size companies do not have a big share of production output. Compared to other big Eurozone economies, like France, Italy or Spain, the German economy does not provide incentives for the creation of new enterprises.

Furthermore, average wage growth is lagging behind the average rate of the OECD, whereas the consumption rate reflected in GDP is much lower than that of Great Britain or the United States, i.e. economies Germany is trying to compete with globally.

The ‘extrovert’ character of the German economy is decreasing imports, thus creating a big “money box” (trade/budget surplus) that is not used for increasing investments and domestic demand. The negative effects of this policy are also reflected in the Eurozone economy, meaning that, although the average unemployment rate is under control, labor costs are decreasing and new forms of part-time, uninsured jobs are steadily increasing.

As for the issues concerning the future of Eurozone, the CDU/CSU –SPD initial agreement has to be more concrete in terms of content and planning, so that all proposals could be negotiated with all member states, along with those ones submitted by France’s President Marcon, the Greek government and other progressive political forces.

The Greek government is vigorously supporting the EU Southern member-states Summit as a place for dialogue and convergence and for proposals to ensure the future of Europe against austerity policies, whereas, in the European Parliament, the debate between the Left, the socialists and the greens is being strengthened, in the context of the “Progressive Caucus” group, in the run-up to the European Elections in May 2019.

Greek Prime Minister Tsipras and French President Macron have established an open channel of communication – despite their differences on other issues – regarding the reform agenda in Europe, the shift towards pro-growth policy models, an increase in public investments, building an effective pillar of social rights, the redistribution of EU funds to achieve a better balance between member states, the banking union and fiscal harmonization. The strengthening of democratic legitimacy and transparency of Eurozone ad hoc institutions, such as the Eurogroup, as well as the transformation of ESM into a new European Monetary Fund are also on the agenda

The delay in the final composition of the government in Berlin exerts a negative impact on the discussion on the Eurozone’s future and the reforms that should take place. Nonetheless, it is positive that SPD leader Martin Schulz has managed to put the policy emphasis on European issues, i.e. social convergence and investments, rather than remaining stuck in merely domestic affairs.

In this respect, the SPD wants decisions on investment to be agreed and monitored by the European Parliament, along with the Bundestag, thus increasing democratic legitimacy and transparency at EU level. On the other hand, Chancellor Angela Merkel accepts the proposal to increase investments in the Eurozone, but she clearly wants the Bundestag to have the final word, minimizing the role of the European Commission and that of the European Parliament.

The SPD has to push for the maximum trade-off and reduce the effect of neoliberal policies in both Germany and the Eurozone. To this end, a new “grand coalition” should invest in a progressive agenda in the Eurozone. Otherwise, the SPD’s role will be further weakened, ideological lines will be blurred once again, and the entire European establishment will miss another, critical chance to shift from neoliberal policies to a sustainable growth agenda.

Dimitris Papadimoulis

Dimitris Papadimoulis is Vice President of the European Parliament, MEP and head of the Syriza party delegation.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u421983467298feb62884 0 The Weak Strongman: How Trump’s Presidency Emboldens America’s EnemiesTimothy Snyder
u4201 af20 c4807b0e1724 3 Ballots or Bans: How Should Democracies Respond to Extremists?Katharina Pistor
u421983c824 240f 477c bc69 697bf625cb93 1 Mind the Gap: Can Europe Afford Its Green and Digital Future?Viktor Skyrman
u421983467b5 5df0 44d2 96fc ba344a10b546 0 Finland’s Austerity Gamble: Tax Cuts for the Rich, Pain for the PoorJussi Systä
u421983467 3f8a 4cbb 9da1 1db7f099aad7 0 The Enduring Appeal of the Hybrid WorkplaceJorge Cabrita

Most Popular Articles

startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer
u421983467 2a24 4c75 9482 03c99ea44770 3 Trump’s Trade War Tears North America Apart – Could Canada and Mexico Turn to Europe?Malcolm Fairbrother
u4219834676e2a479 85e9 435a bf3f 59c90bfe6225 3 Why Good Business Leaders Tune Out the Trump Noise and Stay FocusedStefan Stern
u42198346 4ba7 b898 27a9d72779f7 1 Confronting the Pandemic’s Toxic Political LegacyJan-Werner Müller
u4219834676574c9 df78 4d38 939b 929d7aea0c20 2 The End of Progess? The Dire Consequences of Trump’s ReturnJoseph Stiglitz

Foundation for European Progressive Studies Advertisement

Spring Issues

The Spring issue of The Progressive Post is out!


Since President Trump’s inauguration, the US – hitherto the cornerstone of Western security – is destabilising the world order it helped to build. The US security umbrella is apparently closing on Europe, Ukraine finds itself less and less protected, and the traditional defender of free trade is now shutting the door to foreign goods, sending stock markets on a rollercoaster. How will the European Union respond to this dramatic landscape change? .


Among this issue’s highlights, we discuss European defence strategies, assess how the US president's recent announcements will impact international trade and explore the risks  and opportunities that algorithms pose for workers.


READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity”,

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

ETUI advertisement

HESA Magazine Cover

What kind of impact is artificial intelligence (AI) having, or likely to have, on the way we work and the conditions we work under? Discover the latest issue of HesaMag, the ETUI’s health and safety magazine, which considers this question from many angles.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
How are minimum wage levels changing in Europe?

In a new Eurofound Talks podcast episode, host Mary McCaughey speaks with Eurofound expert Carlos Vacas Soriano about recent changes to minimum wages in Europe and their implications.

Listeners can delve into the intricacies of Europe's minimum wage dynamics and the driving factors behind these shifts. The conversation also highlights the broader effects of minimum wage changes on income inequality and gender equality.

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641